Abstract
This paper examines the Trans-Caucasus Transit Corridor (TCTC) as a strategic linchpin in EU connectivity between Europe and Asia. It argues that sustainable peace between Armenia and Azerbaijan is essential for unlocking the corridor’s full potential, particularly amid shifting geopolitical dynamics and rising instability in the Middle East. The study highlights how Russia’s conflict-driven influence and Azerbaijan’s posture hinder integration and development. It outlines the European Union’s strategic leverage and proposes a policy framework that links investment, inclusion, and deterrence to peace. The TCTC is presented as both a test and opportunity for EU geopolitical coherence and ambition.
Introduction
In today’s fast-evolving geopolitical landscape, Europe finds itself in a quiet but consequential war: a war for talent. Unlike traditional battlegrounds, this one is fought not with weapons or armies, but with education systems, labour policies, more inclusion, and strategic foresight.
The forgotten resource
The ability to attract, nurture, and retain skilled people is increasingly becoming the most defining factor of economic strength and societal resilience. Both the high- and low-skilled workforce must be understood not as something nice to have, but as a critical resource, as vital to Europe’s future as energy, defence, or raw materials.
Yet Europe is falling behind in this race. Eighty per cent of European employers report that they struggle to recruit workers with the right skills (Weber & Adǎscǎlițe, 2024). A persistent mismatch between the skills offered by the labour market and the demands of its industries is stalling growth and undermining competitiveness. Literacy and basic skills levels in parts of the population remain alarmingly low, even as digitalisation and the green transition require increasingly complex competencies. Innovation is not accelerating at the scale or speed required. While the continent rightly focuses on strategic autonomy in areas such as energy, technology, and critical raw materials, we have been slower to grasp that autonomy is impossible without the people to drive it. Simply put, we cannot produce chips without engineers or artificial intelligence without mathematicians, and we cannot accomplish the green transition without skilled technicians.
Demography is at the heart of the problem. Europe’s ageing population means fewer people are entering the workforce, while a growing number are exiting it, often without having passed on their valuable skills and knowledge. At the same time, the social care burden is increasing, creating more demand for labour in sectors already facing critical shortages. This is a demographic time bomb: without serious course correction, Europe risks economic stagnation and an even more fragile social fabric.
To make matters worse, political evolutions in Europe and beyond with rising nationalist movements are eroding the consensus around openness and international cooperation, with direct consequences for talent attraction and retention. Some countries have moved to restrict the intake of foreign students (Pascoe, 2024), while others are tightening migration rules or cutting integration budgets. Stricter migration policies and complex bureaucratic processes continue to act as barriers to third-country nationals entering and integrating into the European job market. These decisions may play well in short-term domestic politics, but they are damaging Europe’s long-term capacity to remain a magnet for global talent.
Meanwhile, our economies are undergoing one shock after another. Inflation and the rising cost of living put massive strains on households and businesses, while geopolitical instability, from the war in Ukraine to the volatility in global trade, creates further uncertainty. For many companies across Europe, especially small and medium-sized enterprises (SMEs), this is not a time of expansion but one of survival. SMEs, to many people’s surprise, comprise 99 per cent of European businesses, providing around 85 million European citizens with jobs (European Commission, n.d.a).
And yet, paradoxically, millions of vacancies remain unfilled across critical sectors, from manufacturing to healthcare, from logistics to construction. The EU’s biggest economy, Germany, reportedly has 1.6 million unfilled positions alone, with the country’s workforce projected to shrink by 10 per cent by 2040 (DW, 2024). The people either are not there or, if they are, they are not where they are needed the most.
Adding to the complexity are internal obstacles that Europe has yet to overcome. Despite decades of integration, the EU still suffers from structural and regulatory fragmentation which slows down and discourages the mobility of skills and qualifications across borders. Labour mobility within the Union remains constrained by bureaucratic inefficiencies, lack of interoperable digital systems, and uneven recognition of credentials. These ‘gaps‘ in completing the Single Market for labour mobility prevent the kind of dynamic workforce redistribution that Europe desperately needs.
In this context, it is not an exaggeration to say that Europe’s competitiveness, and indeed its social model, is at stake. The question now is whether we have the courage to re-think talent as a strategic resource and treat it as such. Winning the talent war requires more than rhetoric: it requires political will, policy streamlining, and re-prioritisation of education and training across different demographic groups, but particularly youth.
Signs of political awakening
The good news is that this conversation is finally gaining traction. The new European Commission, in its first hundred days, has placed labour, skills, and workforce planning at the heart of its political agenda. The European Commission’s Competitiveness Compass, published on 29 January 2025, underlined the need to ‘ensure a good match between skills and labour market demands’ (European Commission, 2025: 22). The subsequent Union of Skills initiative with its various action plans, unveiled by Roxana Mînzatu, EVP and Commissioner for Skills, Education, Quality Jobs and Social Rights, took that mission further.
The Union of Skills targets all aspects of European workforce development, including supporting upskilling and reskilling, promoting labour mobility, helping the free movement of workers, and attracting talent (European Commission, n.d.b). Later in 2025, the Commission will also unveil the Quality Jobs Roadmap package, covering areas from working conditions, wages, skills, and job transition to social protection and career development.
For perhaps the first time, human capital is no longer an afterthought. There is widespread recognition that no industrial strategy, particularly in the context of the twin digital and green transitions, can be implemented without addressing the fundamental question of workforce availability and qualification. In this sense, the shift from ad hoc, reactive policymaking to a more systemic and proactive approach might just create the change we need.
Still, there is a long way to go from political declarations to tangible outcomes. The urgency and scale of the challenge call for a structured, long-term approach, and European industries are on board with it.
Solutions for today and tomorrow
To win the so-called ‘talent war’, Europe must move decisively across three interconnected areas: mobility, shortages, and education. Each of these, on its own, is complex. But they are not stand-alone issues, and all three of have recently become heavily politicised.
Activate labour mobility
European workers must be able to move more easily across borders. Today, only 4 per cent of EU citizens live and work in a Member State other than their own – a shockingly low figure in a Union that prides itself on freedom of movement. Obstacles such as language barriers, inconsistent social security coordination, and administrative hurdles are some of the many reasons for this.
What is needed is a modernised framework for intra-EU mobility, one that integrates digital tools, recognises qualifications easily, and ensures fair access to social protections without penalising mobile workers or employers. A fully implemented and interoperable eDeclaration system – as called for by Ceemet and other employer organisations – would go a long way towards reducing administrative burdens and boosting cross-border mobility of workers.
Target labour and skills shortages
The shortage of skilled workers in Europe is no longer a sector-specific problem; rather, it is an economy-wide crisis. From machine operators to drivers, from engineers to data scientists – Europe needs millions of both high- and low-skilled workers. The EU Talent Pool initiative is a good starting point, but its voluntary nature means that its potential for many industries is limited.
We must treat talent attraction as a global competition. Europe should position itself as an attractive destination for both low- and highly skilled migrants. This can be done through facilitating visa procedures, speeding up qualification recognition, and creating welcoming, stable environments for professionals and their families. More importantly, we need to embrace a narrative that sees migration as an investment in Europeans’ future, not a threat to their livelihoods.
Rely on education and training
Education and training systems must be strategically realigned with labour market realities. Too often, these systems operate in isolation from economic need, resulting in graduates being ill-equipped for today’s industries and employers scrambling to train new hires from scratch, carrying the financial burden of building the workforce they need on their own.
A modern education system should blend academic knowledge with practical skills, put a critical focus on digital skills, foster STEM education from an early age, and elevate the status and quality of vocational training. Lifelong learning should be not just encouraged but enabled, particularly for low-skilled workers, women, and those in shrinking industries. Importantly, training must be flexible and targeted.
Social partners – employers and trade unions – must be at the heart of designing these systems. No top-down reform can substitute for the insight and experience of those closest to the workplace.
A strategic turn for Europe’s future
The twenty-first century is defined not only by technological change and geopolitical realignment but also by a growing awareness that human capability is a strategically important source of resilience. This realisation should lead to a change of mindset in many areas: investing in education and skilling as much as we do in other areas, viewing labour mobility as a solution instead of a problem, rethinking bureaucratic habits in favour of faster and smarter policymaking, and telling a different story about migration focused on opportunity and mutual benefit.
It is true that we are already falling behind in many of these areas. The demographic trends we face today were set in motion decades ago. The investments we make now in education, training, and talent attraction will take time to materialise, and mindset changes sometimes take generations to succeed.
But Europe already has strong foundations: a large market and a population of almost half a billion, legacy industries, a tradition of high labour standards, and engaged social partners. The race is on, and we hope that we all help Europe win it.
References
DW. (2024). ‘Germany: 288,000 Foreign Workers Needed Annually until 2040’. 26 November, https://www.dw.com/en/germany-needs-288000-foreign-workers-annually-until-2040-study/a-70885279.
European Commission. (n.d.a). ‘Entrepreneurship and Small and Medium-Sized Enterprises (SMEs)’, https://single-market-economy.ec.europa.eu/smes_en.
European Commission. (n.d.b). ‘Union of Skills’, https://commission.europa.eu/topics/eu-competitiveness/union-skills_en.
European Commission. (2025). ‘A Competitive Compass for the EU’. 29 January, https://commission.europa.eu/document/download/10017eb1-4722-4333-add2-e0ed18105a34_en.
Pascoe, R. (2024). ‘Dutch to Slash English University Courses, Curb Foreign Students’. Dutch News, 16 October, https://www.dutchnews.nl/2024/10/dutch-to-slash-english-university-courses-curb-foreign-students/.
Weber, T., & Adǎscǎliței, D. (2024). ‘Company Practices to Tackle Labour Shortages’. European Foundation for the Improvement of Living and Working Conditions,10 September, https://www.eurofound.europa.eu/en/publications/2024/company-practices-tackle-labour-shortages.